VIVA ENERGY REIT RESULTS PERIOD ENDED 31 DECEMBER 2016 23 February - - PowerPoint PPT Presentation

VIVA ENERGY REIT RESULTS PERIOD ENDED 31 DECEMBER 2016

23 February 2017

Disclaimer: This presentation has been prepared by Viva Energy REIT (“VVR” or “Viva Energy REIT”) which is a stapled entity comprising shares in Viva Energy REIT Limited (ABN 35 612 986 517) stapled with units in the Viva Energy REIT Trust (ARSN 613 146 464). VER Limited (ABN 46 609 868 000 and AFSL 483795) is the Responsible Entity of the Viva Energy REIT Trust, and VER Manager Pty Ltd provides management services to VER Limited and Viva Energy REIT. The fjnancial information is presented on both a statutory basis (prepared in accordance with Australian accounting standards which include Australian equivalent to International Financial Reporting Standards (IFRS) as well as information provided on a non-IFRS basis. VVR considers that the non-IFRS fjnancial information is important to assist in evaluating VVR’s performance. The information is presented to assist in making appropriate comparisons with prior periods and to assess the operating performance of VVR’s business. The information provided in this presentation should be considered together with the fjnancial statements, ASX announcements and other information available on the VVR website www.vivaenergyreit.com.au. For a reconciliation of the non-IFRS fjnancial information to IFRS-compliant comparative information, please refer to slide 13 in this Presentation. The information is in summary form and does not purport to be complete. This presentation is for information purposes only, is of a general nature, does not constitute fjnancial product advice, nor is it intended to constitute legal, tax or accounting advice or opinion. It does not constitute in any jurisdiction, whether in Australia or elsewhere, an invitation to apply for or purchase stapled securities of VVR or any other fjnancial product. The distribution of this presentation outside Australia may be restricted by

• law. Any recipient of this presentation outside Australia must seek advice
• n and observe any such restrictions.

This presentation has been prepared without taking into account the investment objectives, fjnancial situation or particular needs of any particular person. Investors must rely on their own examination of VVR, including the merits and risks involved. Each person should consult a professional investment adviser before making any decision regarding a fjnancial product. In preparing this presentation the authors has relied upon and assumed, without independent verifjcation, the accuracy and completeness of all information available from public sources or which has

• therwise been reviewed in preparation of the presentation. All reasonable

care has been taken in preparing the information and assumptions contained in this presentation, however no representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this

• presentation. The information contained in this presentation is current as

at the date of this presentation and is subject to change without notice. Past performance is not a reliable indicator of future performance. To the extent that certain statements in this presentation may constitute ‘forward-looking statements’ or statements about ‘future matters’, the information refmects VVR’s intent, belief or expectations at the date of this

• presentation. Such prospective fjnancial information contained within

this presentation may be unreliable given the circumstances and the underlying assumptions to this information may materially change in the future. Neither Viva Energy REIT, VER Manager Pty Ltd, nor any of their associates, related entities or directors, give any warranty as to the accuracy, reliability or completeness of the information contained in this

• presentation. Except to the extent liability under any applicable laws

cannot be excluded and subject to any continuing obligations under the ASX listing rules, VER Manager Pty Ltd, Viva Energy REIT and its associates, related entities, directors, employees and consultants do not accept and expressly disclaim any liability for any loss or damage (whether direct, indirect, consequential or otherwise) arising from the use of, or reliance on, anything contained in or omitted from this presentation. Any forward-looking statements, including projections, guidance on future revenues, earnings and estimates, are provided as a general guide only and should not be relied upon as an indication or guarantee

• f future performance. Forward-looking statements involve known and

unknown risks, uncertainties and other factors that may cause VVR’s actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Any forward-looking statements,

• pinions and estimates in this presentation are based on assumptions

and contingencies which are subject to change without notice, as are statements about market and industry trends, which are based on interpretations of current market conditions. For example, the factors that are likely to affect the results of VVR include, but are not limited to, general economic conditions in Australia, New Zealand and Asia, exchange rates, competition in the markets in which VVR operates and the inherent regulatory risks in the business of VVR. You should rely on your own independent assessment of any information, statements or representations contained in this presentation and any reliance on information in this presentation will be entirely at your own risk. This presentation may not be reproduced or published, in whole or in part, for any purpose without the prior written permission of VVR. Cover: Coles Express Collingwood, VIC

Highlights 4 Financial Results 11 Portfolio & Acquisition Update 16 Industry Update 22 Viva Energy Australia Update 26 FY2017 Outlook 30 Questions 33

Agenda

Highlights

Margaret Kennedy Managing Director VER Manager

Coles Express West Ryde, NSW

5

Viva Energy REIT Overview

As at 31 December 2016

Portfolio of 425 high quality service station properties Geographically diverse across all Australian states and territories Security of income through long term triple-net leases to Viva Energy Australia, a high quality tenant 100% occupancy, 3% p.a. fjxed rent increases WALE of 14.9 years, with no lease expiry before 2026

6

Highlights

Business Platform Established Deal Pipeline Established Exceeded IPO Forecast Gearing Below Target Range

7

Financial Highlights

Period ended 31 December 2016

Statutory Net Profit $1.0m Distributable Earnings $36.5m 5.28 CPS +3.7% forecast Paid 6 Feb 2017 Payout Ratio 100% Net Tangible Assets (NTA) $2.07 per stapled security

8

Portfolio/Acquisition Highlights

• 1. Initial Portfolio outlined in PDS
• 2. Acquisitions as outlined in slide 19 as at 31 December 2016
• 3. Excluding transaction costs
• 4. Unexpired Viva Energy Australia lease term only

Acquisitions2 contracted for total $26.2 million3

Location Annerley, QLD Half Way Creek, NSW Blaxland, NSW Alice Springs, NT Price3 $10.8 million $7.0 million $5.5 million $2.9 million Yield3 5.3% 7.5% 7.0% 6.6% Lease Term4 14.9 years 4.7 years 4.4 years 10.3 years

Portfolio1 at 31 December 2016

Valuation $2.1 billion WACR 5.9% WALE 14.9 years

9

Strategy

Service station investments – strong defensive characteristics Acquisition pipeline established

Consumer staple - fuel and convenience Numerous opportunities under consideration Demand for fuel relatively inelastic Focus on strategic sites that complement VVR’s existing portfolio Contracted rental growth profjle underpins earnings growth VVR is not restricted to properties leased to Viva Energy Australia Highly liquid property market Investment grade rated tenant Australia-wide, geographically diverse consistent with VVR’s existing portfolio Triple net leases

10

• 3% fjxed rental growth commencing August 20171
• Properties will be independently valued at least every three years on a

rolling annual basis commencing as at 31 Dec 2017

• WALE 14.9 years

Portfolio Overview

As at 31 December 2016

Portfolio WALE – by income

• 1. Based on Initial Portfolio outlined in the PDS

2016 ... 2025 Expiry by number of properties: 9.6 years until fjrst expiry Year of lease expiry 2034

23.7%

2033

18.0%

2032

13.7%

2031

11.0%

2030

7.5%

2029

7.6%

2028

7.6%

2027

5.8%

2026

5.1% 42 39 44 34 33 52 59 62 60 5 10 15 20 25

% of income

Financial Results

Guy Farrands Chief Financial Offjcer VER Manager

Coles Express Coorparoo, QLD

12

Statutory Financial Performance

Statutory Profit and Loss $M Period to 31 Dec 2016 PDS Forecast REVENUE Gross property income 49.2 49.2 Straight lining of rental income 12.1 12.1 Interest income 0.4 0.2 Total revenue 61.7 61.5 EXPENSES Interest expense (11.6) (12.2) Board and Management expenses (2.1) (2.6) Total operating expenses (13.7) (14.8) Net operating profit 48.0 46.7 Initial formation/transaction costs (34.9) (35.1) 13.1 11.6 Straight lining adjustment on fair value of investment properties (12.1) (12.1) Net profit 1.0 (0.6)

One off interest income Swapped at lower than forecast rate Costs not incurred lineally 7.4% below forecast

Note – straight lining of rental income adjustment on fair value of investment properties is included in PDS forecast to enable like-for-like comparison – rounding of fjgures may result in some discrepancies between the sum components and the totals outlined in this table

13

Distributable Earnings

Distributable Earnings $M Period to 31 Dec 2016 PDS Forecast Gross property income 49.2 49.2 Straight lining of rental income 12.1 12.1 Interest income 0.4 0.2 Total revenue 61.7 61.5 Interest expense (11.6) (12.2) Board and Management expenses (2.1) (2.6) Total operating expenses (13.7) (14.8) Net operating profit – statutory 48.0 46.7 Add back: Amortisation of debt establishment costs 0.6 0.6 Deduct: Straight lining of rental income (12.1) (12.1) Distributable Earnings 36.5 35.1 Distributable Earnings - cents per security 5.28 5.09 Distribution - cents per security paid 6 February 2017 5.28 +3.70%

Note – rounding of fjgures may result in some discrepancies between the sum components and the totals outlined in this table

14

Financial Position

Balance Sheet $M 31 Dec 2016 Cash 54 Investment properties 2,105 Fair value of interest rate swaps 12 Prepayments and deposits 2 Total Assets 2,173 Accounts payable and accruals 12 Borrowings 731 Total Liabilities 743 Net Assets 1,430 Net Tangible Assets Per Security $2.071

$36m distributed 6 Feb 2017 Unchanged from PDS

• Directors valuations undertaken as at 31 December 2016
• Properties must be independently valued at least every three years on a

rolling annual basis commencing as at 31 December 2017

• 1. Including distribution paid in February 2017

15

Capital Management

As at 31 December 2016

Gearing at 34.4% and forecast FY17 ICR of 4.1X Target gearing between 35% to 45% Drawn debt has been 100% hedged for a weighted average 3.6 years at an average interest rate of 3.72% Unsecured borrowings with no priority security Additional $100 million 3 years revolving credit facility. This is expected to be used primarily to fund growth

• pportunities

– $10 million allocated to settle property acquisitions – VVR may, at any time after the fjrst anniversary of listing, request an increase to the size of the revolving credit facility on a pre-approved, but non-committed basis, by an additional $200 million subject to certain conditions1 Successful secondary sell down of IPO debt undertaken by debt underwriters in November 2016 – 16 domestic and foreign banks now participating

• 1. Including, but not limited to, the total amount drawn under each Facility (including proposed drawdown increase) will not cause gearing to exceed 45% and drawdown is for an approved purpose

Portfolio & Acquisition Update

Margaret Kennedy

Coles Express Ultimo, NSW

17

Portfolio1 characteristics

• Portfolio weighted towards Australia’s more populous

Eastern seaboard

• High proportion of metropolitan sites

– Typically higher value and higher volume sites that attract tighter capitalisation rates

• Regional sites include highway sites and are an

important part of national network offering

Portfolio Overview

As at 31 December 2016

# of sites1 Indicative Independent valuation2 ($m) Average property value2 ($m) WACR1 WALE (years) Metropolitan 304 1,608 5.3 5.6% 15.1 Regional 121 497 4.1 6.8% 14.2 Total 425 2,105 5.0 5.9% 14.9

• 1. Initial portfolio outlined in PDS
• 2. Independent valuation as at 1 July 2016

33% 20% 6% 1% 8% 3% 2% 27%

18

Acquisition Summary

• 1. Excluding transaction costs

VVR has entered into contracts to acquire four Shell/Coles Express sites – One new to industry site – One established truck stop site – Two established retail sites Total acquisition price $26.2m1 WACR 6.4%1 WALE of Viva Energy Australia tenancy is 8 years

19

388 Ipswich Road, Annerley, QLD New to industry Shell/Coles Express site in prime inner Brisbane location on a major arterial 100% of rental income attributable to Viva Energy Australia Triple net lease, annual rent review 3%

Acquisition – QLD

• 1. Excluding transaction costs

Coles Express Annerley, QLD

Price $10,800,0001 Cap rate 5.3%1 Site Area 2,463 sqm approx Unexpired Viva Lease term 14.9 years plus 4x5 year options Settlement date 31 March 2017

20

4974 Pacific Highway, Half Way Creek, NSW Existing Shell/Coles Express site with Dominos Pizza1 as co tenant 87% of rental income attributable to Viva Energy Australia Double net lease, rent review higher of 3.5% or CPI paid quarterly in advance 126 Great Western Highway, Blaxland, NSW Existing Shell/Coles Express site with a fjtness centre as co tenant in strategic highway location on primary Blue Mountains arterial road 82% of rental income attributable to Viva Energy Australia Double net lease, rent review CPI paid quarterly in advance

Acquisitions – NSW

• 1. Tenant is Domino’s Pizza Enterprises Pty Ltd
• 2. Excluding transaction costs
• 3. Tenant is Cainlee Investments Pty Ltd

Price $7,000,0002 Cap rate 7.5%2 Site Area 65,660 sqm approx Unexpired Viva Lease term 4.7 years plus 2x5 year options Settlement date 31 March 2017 Price $5,500,0002 Cap rate 7.0%2 Site Area 1,506 sqm approx Unexpired Viva Lease term 4.4 years plus 2x5 year options Settlement date 31 March 2017

21

11 Lilbili Street Braitling, Alice Springs, NT Existing Shell/Coles Express truck stop site on major interstate highway location 100% of rental income attributable to Viva Energy Australia Double net lease, rent review higher of 3.5% or CPI paid annually in advance

Acquisition – NT

• 1. Excluding transaction costs

Price $2,900,0001 Cap rate 6.6%1 Site Area 48,700 sqm approx Unexpired Viva Lease term 10.3 years Settlement date 31 March 2017

Industry Update

Margaret Kennedy

Coles Express St Kilda, VIC

23

Fuel Retailing in Australia 2016

Moderate level of market share concentration Key success factors – Proximity to key markets – Loyal customer base – Support from downstream activity – Close monitoring of competition Barriers to entry are high and increasing Profjt margins on fuel sales remained fairly steady over past fjve years Estimated forecast 2016/17 revenue $31.6b -2.1% PCP Estimated forecast 2017/18 revenue $32.6b +3.0% PCP Source: Magner, L. (October 2016). Fuelled up: Revenue is set to recover over the next fjve years as oil prices

• increase. IBISWorld Industry Report G4000 Fuel Retailing in Australia. Retrieved from IBISWorld database

24

Industry Participant Update

Woolworths announced plans to sell fuel business and enter strategic partnership with BP Caltex Australia purchase Milemaker (Vic) & Gull New Zealand APN Property Group launched an unlisted fund with an initial portfolio

• f 23 Puma sites

Coles Express Balmoral, QLD

25

Service Station Sales during year ended 31 December 2016

Source: JLL Market Report 31 December 2016 for VER Manager Pty Ltd as Manager of Viva Energy REIT. Yields are net initial yields based upon net passing income at the time of sale and are based on a sample of service station sales through regional and metropolitan Australia during 2016. This sales data is intended to provide an indication only, JLL are not representing that every sale within the Sector has been captured within the sample. Jones Lang LaSalle accepts no liability for any inaccuracies contained in the information that has been sourced from a variety of industry sources, or for conclusions which are drawn either wholly or partially from that information. No responsibility is accepted to any third parties.

2% 5 10 Remaining Lease Term Initial Yield

VVR Initial Portfolio

15 20 3% 4% 5% 6% 7% 8% 9%

Market remains highly liquid Evidence of sales supporting long lease terms Strong sales activity during 2016

Viva Energy Australia Update

Margaret Kennedy

Coles Express Greenacre, NSW

This section includes information regarding Viva Energy Australia Pty Ltd and its affjliates and their collective operations (Viva Energy). The information is provided for background purposes

• nly, and neither VVR, nor the representatives of VVR or VER Manager, do or will make any representation about the performance or operations of Viva Energy. Further, Viva Energy makes no

representations (about itself, VVR or VER Manager) in this presentation, and does not assume responsibility for the contents of this presentation. General information is sourced from publicly available information (including the PDS), or where relevant, specifjc data sourced from Viva Energy has been reference as such.

27 Viva Energy’s Geelong Refinery Other domestic refineries Overseas imports

Retail Dealer Owned Retail Alliance Transport Lubricants Specialties – Viva Energy Warehouses for bulk and packed lubricants – Third party warehouse – Delivery to customers through specialised transport contracts

Viva Energy’s Distribution Assets

– Viva Energy Terminals – Joint Terminals – Industry Terminals – Customer Terminals (operated by Viva Energy) – Fuel transported through strategic hired carriers Aviation1 Marine Mining & Industrial Wholesale

Pinkenba bulk lubricants terminal

Trading Refining & supply Distribution Marketing

Fully integrated player with key positions in all major market segments

Snapshot of Viva Energy Australia

• 1. Viva Energy Australia agreed to aquire Shell Aviation business for approximately USD$250 million in December 2016, settlement due mid 2017 – the transaction remains subject to regulatory and
• ther approvals

28

Viva Energy Australia Retail Network

A leading fuel and convenience retailing platform

• 1. Network fjgures as at 31 December 2016. Source: Viva Energy Australia
• 2. References to Coles Express refer to Eureka Operations Pty Ltd trading as Coles Express Eureka Operations Pty Ltd is an indirect, wholly owned subsidiary of Wesfarmers Limited
• 3. Shell branding is used in the marketing of fuels in Australia by Viva Energy under a Brand Licence Agreement
• 4. By market capitalisation as at the date of this Presentation

Viva Energy overview

Viva Energy manufactures, supplies and markets fuel in Australia through a network of 952 Shell branded service stations1 – 695 Alliance properties

• Operated by Coles Express2 under lease/license from Viva Energy
• Viva Energy is the exclusive supplier of fuel and other oil products in Australia under the Shell brand3

– 257 dealer operated and unmanned truck stops branded Shell and supplied by Viva Energy Service station network supplied by Viva Energy is a market leader Coles Express, part of leading Australian retailer Coles, both of which form part of the Wesfarmers Limited group, an ASX top 10 listed entity4 Viva Energy REIT owns 423 of the existing Alliance sites and 2 unmanned Shell branded truck stops

29

Viva Energy Australia Financial Position

For year ended 31 December 2016

Assigned S&P BBB- rating; outlook stable in August 2016 Agreed to acquire Shell Aviation business for approximately USD250 million in December 2016, settlement due mid 2017, subject to regulatory and other approvals Productive working relationship between Viva Energy Australia & VVR management Viva Energy Australia fjnancial position is strong and in line with that outlined in VVR PDS

FY2017 Outlook

Margaret Kennedy

Coles Express Bunker Hill, VIC

31

Outlook and Forecast

VVR’s investment objective is to own a portfolio of high quality and strategically located Australian service stations sites subject to long term leases to Viva Energy Australia and other tenants with strong credit profjles VVR will consider and participate in acquisition and site development

• pportunities which:
• Focus on sustainable

risk adjusted returns

• Add value for security

holders Review debt capital structure, maintain target gearing range of 35-45% Forecast year end Dec 2017 earnings guidance remains unchanged at 13.07 CPS, subject to no material changes in market conditions

Optimise Core Business Growth Opportunities Capital Management Forecast

32

Glossary

Alliance The contractual alliance between Viva Energy Australia and Coles Express (and their associated entities), including the Alliance Agreement and Site Agreements as outlined in the PDS Cap Rate Capitalisation Rate Distributable Income This is a non-IFRS measure being net statutory profjt adjusted to remove transaction costs and non-cash items, including straight lining of rental income, amortization of debt and establishment fees and any fair value adjustments to investment properties or derivatives Forecast The fjnancial forecasts contained in Viva Energy REIT’s PDS FY Viva Energy REIT’s fjnancial year, being year ended 31 December Gearing Total liabilities to total tangible assets measured in accordance with Accounting Standards, but excluding any mark-to-market valuations of derivative assets/liabilities Interest Coverage Ratio or ICR Earnings Before Interest, Tax, Depreciation and Amortisation (excluding any asset revaluations, mark-to-market movements and transaction costs) divided by Net Interest Expense LVR Loan to valuation ratio PDS Viva Energy REIT’s Prospectus and Product Disclosure Statement dated 22 July 2016 PCP Prior corresponding period Period or The Period The period from the establishment date of Viva Energy REIT Trust (ARSN 613 146 464) and the incorporation date of the Viva Energy REIT Limited (ABN 35 612 986 517) (being 14 June 2016) to 31 December 2016 WACR Weighted average capitalisation rate, weighted by contract price excluding transaction costs WALE Weighted average lease expiry, weighted by rental income VVR Viva Energy REIT is a stapled entity comprising one share in Viva Energy REIT Limited (ABN 35 612 986 517) and

• ne unit in the Viva Energy REIT Trust (ARSN 613 146 464)

Yield Net income (before acquisition costs) divided by purchase price before adjustment for maintenance capex and multiple holding land tax, expressed as a percentage

Questions

Coles Express Milton, QLD